Selling A Business – How to get started

When it comes to selling a business, a quote from Walt Disney comes to mind “The way to get started is to quit talking and get doing.”

Selling a BusinessFinding the Advisors

Your selling dream team consists of lawyers, brokers, accountants and tax advisors.  

With the right preparation, it also includes financial planners, wealth advisors and every other expert and specialist it takes to get you, your team and your business in the best shape to get exit ready.  This team unlocks all the wealth you have invested in your business.  You need to know, like and trust them to ensure you maximize your return on the sale of your business.  They need to get to know you and your business to be able to help you get what you want and act in your best interest.

Selling a Business – Lawyers

Selling a business is the final part of a long hard journey.  It is a complex and emotional process.  You aren’t legally required to have a solicitor, but it is highly recommended that you seek professional advice from an M&A specialist rather than a high street generalist.  

A bit like you’d never go to a GP for heart surgery, you want someone on your side who has been round the block a few times and knows what they are dealing with.

The lawyer drafts the sale agreement and helps you negotiate the final settlement, often hand in hand with a broker.  They also help with formalising contracts held with your stakeholders i.e., customers, suppliers, and employees. Discussing your plans with your lawyer before you begin the sales process means you’ll be more prepared for what is to come.  This saves you a lot of stress, time, and money later on in the process.

Fees are significant in the sale process.  Sellers are often surprised by this.  The price you pay if you do not get the right advice is much higher if it goes wrong.  Your lawyer guides you through the individual clauses in the contract paperwork.  They make sure you understand the risks you are taking, your exposure to future liability and how to protect yourself.  Last minute changes always arise so having a lawyer that is used to this and knows how to handle it is worth the fees.  It is always your own responsibility to understand the documents you sign.

Lawyers make sure the entire process and documentation is valid.  This includes any regulatory controls if they apply.  When selling a business, the lawyer works as part of a team of other professionals.  They can negotiate with the buyer or their lawyer if required.  If you don’t have a broker involved, getting a 3rd partythird party to negotiate is a good idea.  Make sure whoever it is has the negotiation skills and knows what you want.

Selling a BusinessBrokers / M&A Advisors 

M&A advisers ensure the management team are not distracted and can continue to run the business. They typically service the needs of mid-market businesses over £5m valuations.  

A broker is the business equivalent of an estate agent and generally works with businesses of lower valuations.  This is just a rule of thumb.  It’s not an absolute science.  As with all professional services, there are good and not-so-good.  

Getting the best deal for you means looking at more than one offer and making sure you ask the right questions.

It’s easy to get taken in with tales of how many businesses a broker has sold.  It’s a better question to ask, “How many businesses have you tried to sell and what % were successful?”  

“Planning is bringing the future to the present so you can do something about it now.”
Alan Lakein

Any broker who has a low sale completion success rate is earning their fees from the process not the success.  Be warned, volume brokers charge 5 -6 figure sums BEFORE they’ve sold your business then add on several % points for the success too.  

Reputable brokers are clear on the chances of success and won’t take you on if they don’t think they can achieve a successful sale.  Volume players won’t care and will take the fees regardless of the chances of success.  

A specialist in your industry sector has better chances of completing a sale and getting the highest price for your business. They can identify potential strategic acquirers willing and able to pay a higher price for the business.  This includes overseas buyers which are currently acquiring UK businesses faster and for higher prices than domestic buyers.   

M&A advisor’s act in much the same way as reputable estate agents and are often specialists in specific industries or business models.  Reputable advisors let you know what buyers are looking for and how to equip yourself and your business to attract the best deals.  At the very least they guide you through the process before you get started and let you know what to expect and how they work.  

The best ones have an existing network of contacts that help you identify the right kind of potential buyers. Sometimes the corporate advisor does not have expertise in finding a buyer and works with a broker to find one.  Both work in your interest. 

Business broker / M&A advisor fees in the UK range from 1% to 10% of the sale value, in addition to legal fees and other advisory fees.  As this is one of the biggest parts of the cost of selling your business it’s worth spending time getting one you can work with.  

“Planning is bringing the future to the present so you can do something about it now.”
Alan Lakein

Selling a Business – Always ask:

  • What industry experience does the firm have?
  • Who, specifically, will be working on my sale?
  • How many other deals will be going on at the same time? (How important am I to you?)
  • What’s the process?
  • How will your firm find my buyer?
  • Who do you think will be a good buyer?
  • What’s my business value?
  • How do you ensure my confidentiality is protected? 
  • What documents are used – and can I see samples?
  • What is your fee structure?
  • How do you support me before, during and after the sale process?

Timing – again!

In the same way it’s never wrong to be prepared; it’s never too early to get the team in place and get started.  Ideally, getting started in the preparation starts 2-3 years in advance. 

Exit and succession planning takes time, and identifying the team of advisors during this period means you are making informed decisions based on the experience of the relationship.

Your advisor team gets to know the business and gives you advice on what adds value.  This makes you more attractive to the buyers they are mixing with on a daily basis.  Sometimes the perfect buyer comes across the horizon while you are in preparation mode.  If the timing is right and you are doing the right things to get ready, you can end up selling a bit earlier but still getting the same value.  

The steps for selling a business are straightforward but not necessarily easy.  Knowing how to increase the value of a business is more complicated and takes much longer.  

Are you ready to leave. your business (no matter when it happens)? Click here to contact Christine by email alternatively you can book a call with the Business Mentor of the Year 2020, author and speaker. Who helps business founders get their businesses exit ready so they can enjoy a happier, richer future.  She saves them THOUSANDS and increases the value of their businesses by MILLIONS.